Surprising to see that they decided to put a Qualcomm Snapgradon processor in a TV. I bet the execs at QCOM are laughing at how they just stumbled into this massive lucrative market. Could drive Billions of dollars in incremental revenues when most TV’s have an operating system on them in 5 years.
Time for RIM to consider an exit strategy ($RIMM, $MSFT, $DELL)
The more and more Canadian investors I meet, the more I hear the same thing; “Chris what is going to happen to RIM?” As someone who follows the tech industry very closely they want me to say, “Well they have this miracle phone coming out next year, which will make everything OK!” But if I said that I would be lying 100%. RIM is clearly Canada’s most important tech company and employs more than 15,000 employees in Canada, making it an important institution. Unfortunately though, I don’t see any way they can turn around without firing at least half this workforce. I also want to explore the likelihood that they will get bought out, given this is what almost everyone assumes will happen.
Every mainstream media outlet has come to the conclusion that it is just a matter of time before Microsoft buys RIM. But have they actually thought this through? Let me explain why I think this is in fact almost certainly not going to happen.
Microsoft spent hundred of millions of dollars to completely rebuild their mobile operating system in Windows Phone 7. And personally I’m surprised to say that I think they did a really good job. The innovative home screen and simple looking app design was completely new and in many ways better than the competition. Most importantly, a lot of app developers have said that the Windows Phone SDK, used to code and test their apps, is easier than iOS and Android to use. So, is Microsoft going to buy RIM for their software? Not a chance, Windows Phone is miles better than RIM’s operating system QNX.
Secondly, maybe Microsoft will buy RIM for their hardware manufacturing expertise, optimistic Canadian’s opine. Blackberry’s are the most durable and solidly built phones according to many experts. But I think they are forgetting a key point, Microsoft doesn’t make phones! Windows Phone has always been outsourced to third party manufacturers like HTC and Samsung. If Microsoft began making their own hardware it would send a bad signal to their manufacturing partners.
In summary, would Microsoft buy RIM for their software? Not a chance. Would Microsoft buy RIM for their hardware? Not a chance. Aha, but those patents must be worth something right. Sure, patents are valuable, but would it be smart to buy a company losing money and trying to keep 20,000 employees looking busy every day just for some pieces of paper? Once again I find this unlikely too. The bottom line is that Microsoft is not going to buy RIM and even if they did it would be a crazy decision and investors would sell Microsoft stock bringing down the RIM purchase price anyhow.
But, I do think there is one company that could buy RIM and make it a well suited part of their company. At the end of the day Blackberry will never become a mainstream consumer product, because it was always created with the enterprise in mind. The only people who can get excited about Blackberry these days are teenage girls and Chief Technology Officers. CTO’s love the cost savings and tightly controlled tools which make it cheap and easy to deploy on a wide scale. Guess who else will never become a mainstream consumer company but is loved by many CTO’s? Dell. Dell makes computers cheaply and easy for enterprises to deploy because of their discount programs and large manufacturing facilities. So wouldn’t it make sense for Dell to buy a phone company specialising in their main target market. I can already hear their sales pitch to the Fortune 500 companies; “Buy 100 computers and we’ll throw in 200 Blackberry’s for you!” What a great deal it would be. The cross selling opportunities would be endless.
From a software standpoint Dell could also copy a page from the Apple playbook to install Blackberry desktop software on every Dell. People with Mac’s start using iTunes and before they even realise Apple has them locked in because now they say well I might as well buy an iPhone because all of my music is already in iTunes.
Finally, the financial details would make it a no-brainer for Dell too. With $14 Billion in cash on their balance sheet and a RIM market cap of $8 Billion Dell could easily go for a 50/50 cash-share purchase of $10 Billion and see it be immediately accretive to earnings.
At the end of the day though, the unfortunate thing is that whoever buys RIM will have to fire a ton of employees, leaving the Kitchener Waterloo area struggling for years to regain it’s footing.
Every mainstream media outlet has come to the conclusion that it is just a matter of time before Microsoft buys RIM. But have they actually thought this through? Let me explain why I think this is in fact almost certainly not going to happen.
Microsoft spent hundred of millions of dollars to completely rebuild their mobile operating system in Windows Phone 7. And personally I’m surprised to say that I think they did a really good job. The innovative home screen and simple looking app design was completely new and in many ways better than the competition. Most importantly, a lot of app developers have said that the Windows Phone SDK, used to code and test their apps, is easier than iOS and Android to use. So, is Microsoft going to buy RIM for their software? Not a chance, Windows Phone is miles better than RIM’s operating system QNX.
Secondly, maybe Microsoft will buy RIM for their hardware manufacturing expertise, optimistic Canadian’s opine. Blackberry’s are the most durable and solidly built phones according to many experts. But I think they are forgetting a key point, Microsoft doesn’t make phones! Windows Phone has always been outsourced to third party manufacturers like HTC and Samsung. If Microsoft began making their own hardware it would send a bad signal to their manufacturing partners.
In summary, would Microsoft buy RIM for their software? Not a chance. Would Microsoft buy RIM for their hardware? Not a chance. Aha, but those patents must be worth something right. Sure, patents are valuable, but would it be smart to buy a company losing money and trying to keep 20,000 employees looking busy every day just for some pieces of paper? Once again I find this unlikely too. The bottom line is that Microsoft is not going to buy RIM and even if they did it would be a crazy decision and investors would sell Microsoft stock bringing down the RIM purchase price anyhow.
But, I do think there is one company that could buy RIM and make it a well suited part of their company. At the end of the day Blackberry will never become a mainstream consumer product, because it was always created with the enterprise in mind. The only people who can get excited about Blackberry these days are teenage girls and Chief Technology Officers. CTO’s love the cost savings and tightly controlled tools which make it cheap and easy to deploy on a wide scale. Guess who else will never become a mainstream consumer company but is loved by many CTO’s? Dell. Dell makes computers cheaply and easy for enterprises to deploy because of their discount programs and large manufacturing facilities. So wouldn’t it make sense for Dell to buy a phone company specialising in their main target market. I can already hear their sales pitch to the Fortune 500 companies; “Buy 100 computers and we’ll throw in 200 Blackberry’s for you!” What a great deal it would be. The cross selling opportunities would be endless.
From a software standpoint Dell could also copy a page from the Apple playbook to install Blackberry desktop software on every Dell. People with Mac’s start using iTunes and before they even realise Apple has them locked in because now they say well I might as well buy an iPhone because all of my music is already in iTunes.
Finally, the financial details would make it a no-brainer for Dell too. With $14 Billion in cash on their balance sheet and a RIM market cap of $8 Billion Dell could easily go for a 50/50 cash-share purchase of $10 Billion and see it be immediately accretive to earnings.
At the end of the day though, the unfortunate thing is that whoever buys RIM will have to fire a ton of employees, leaving the Kitchener Waterloo area struggling for years to regain it’s footing.
Online Retail Following The Same Old Pattern ($AMZN)
As Black Friday kicks the holiday season into high gear I’ve been thinking a lot about online retailers and which ones would be good investments as more and more Christmas spending moves online. But as I was doing my research I realised that an interesting pattern throughout the technology industry is once again playing out in the online retail industry.
What I’ve observed is that typically in new technology industries once a company gains a market lead the momentum they gain leads to a near monopoly. My theory for why this happens is that consumers don’t want to research which company is the best, they want to use their friends and the market as positive reinforcement for choosing. This has played out in the PC industry, internet search industry, mp3 industry, and many more. In each of these industries once a product reached the tipping point of popularity consumers switch en masse without researching any competitors. Was Google really the best search engine? Was Windows really the best PC operating system? Was the iPod really the best mp3 player? I suspect the answer to each of these is not a definitive yes that most would think.
What I’ve observed is that typically in new technology industries once a company gains a market lead the momentum they gain leads to a near monopoly. My theory for why this happens is that consumers don’t want to research which company is the best, they want to use their friends and the market as positive reinforcement for choosing. This has played out in the PC industry, internet search industry, mp3 industry, and many more. In each of these industries once a product reached the tipping point of popularity consumers switch en masse without researching any competitors. Was Google really the best search engine? Was Windows really the best PC operating system? Was the iPod really the best mp3 player? I suspect the answer to each of these is not a definitive yes that most would think.
Company Revenue growth in most recent quarter
Bluefly 10%
1-800-Flowers.com 15%
United Online -4%
Amazon 44%
From looking at these numbers it seems that the online retail industry is shifting into becoming the Amazon industry the same way many other tech industries have evolved. Many people new to buying things online are not even testing out other online retailers, instead assuming that because their friend buys stuff on Amazon it must be the best. Amazon is the only one with meaningful growth rates and must be gaining market share at a remarkable rate.
The conclusion I’ve made is that unfortunately this means the other online retailers will struggle in the long run to gain customers who are more comfortable going with the large market leader. This is despite the fact that if you want to buy a watch or a new shirt you will get a much better product on Bluefly than Amazon. Consumers will gradually lose interest in comparison shopping and will instead gravitate towards Amazon.
Because of this I won’t be investing in any online retailers and Amazon’s ridiculous valuation in combination with their microscopic margins means I won’t be investing in them either.
Interesting that RIM lost 4.6% market share and Android gained exactly 4.6% market share. Most people assume that Blackberry owners are defecting to iPhone. These statistics would suggest however that Blackberry owners may instead be switching to Android.
Groupon + Google = Deja Vu? ($GRPN, $GOOG)
One of the best things about having a blog is that you can write whatever you want, including bold predictions. In my case you get some right and some wrong.
As the Groupon IPO day arrives I’ve been thinking a lot about whether it will be successful and I started to realise that Groupon shares a lot more in common with the largest Internet IPO ever than people would expect. Google raised more than $1 Billion from it’s IPO while Groupon is aiming for $700 Million. But more importantly the criticisms and business models are much more similar than most are considering. I’m making the prediction that Groupon will follow a similar 5 year development arc to Google and will be a hugely valuable company in he future.
When Google IPO’d one of the biggest criticisms was competition. At the time other search engines like Yahoo, Alta Vista, Ask Jeeves, etc. were jostling for eyeballs in the search market. Critics during the Google IPO claimed that the industry had no barriers to entry and that competition would be fierce. Sound familiar? This is the exact same argument that people have been making about Groupon. And yet despite the abundance of daily deal sites many have gone under because of low subscriber interest.
Another key criticism of the Google IPO was that they had a large audience but wouldn’t be able to monetise it. How would they ever make money from the hundreds of millions of people searching the internet? Google constantly evolved their product to make each visitor more valuable to advertisers. Groupon has a similar problem. Sure they may have millions of subscribers but how will they ever make any money? Groupon Now is an early indication of how they evolve and expand this model to make each subscriber spend more money.
Essentially both companies do one thing; they aggregate a group of people and then sell ad space to businesses to show to those people. Simple right? All Groupon needs to do now is learn from Google that making their platform really easy to use for small businesses will lead to huge success. As more businesses offer great deals that will lead even more subscribers to sign up.
I’m going to buy a few shares today and see how things go, but in the mean time I’m pretty excited about this. Google is now a $193 Billion company and there is a chance that 5 years from now Groupon could share a similar price tag.
Tumblr is now officially a big deal.
It’s nice to meet you.
There are lots of reasons we’re excited to be launching the Obama 2012 campaign’s new Tumblr today. But mostly it’s because we’re looking at this as an opportunity to create something that’s not just ours, but yours, too.
We’d like this Tumblr to be a huge…
My opinion on this story is that smartphone sales are directly correlated with a country’s income level. Wealthier consumers want iPhone’s while lower income consumers prefer the lower cost Blackberry’s. Simple right!?
For example, in the US a study showed that 46% of people want to buy an iPhone. Meanwhile in Europe the iPhone started off slowly and is just starting to gather steam now. Trends take longer to take root in poorer countries.
The good news train keeps gathering steam for Apple.
(via Apple Tops U.S. PC Customer Satisfaction Survey for Eighth Consecutive Time - Mac Rumors)
